Home Topics in Depth Economics M. Hudson: How Bankers Became the Top Exploiters of the Economy

  • arendt (1432 posts)
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    M. Hudson: How Bankers Became the Top Exploiters of the Economy

    I often find Michael Hudson’s answers to interviewers’ questions much more to the point than his books, which are sort of rambling and repetitive. In interviews, he sticks to his core insights, which are well worth sharing.

    Here’s a snip

    Economists used to talk about land as a factor of production. But land rights are really a property claim, like a monopoly claim. It’s as if you’d say Walt Disney’s patents on Mickey Mouse or movies that Walt Disney makes are a factor of production. They’re really a property right to charge a monopoly price. The right to charge a monopoly price for a cable service isn’t really a factor of production. It’s extractive. It’s what economists call a zero-sum activity. So classical economics has a different idea of what national income is from today’s idea. A monopoly right is not an addition to national wealth or income just because monopolists make more. It’s a subtraction from the economy’s circular flow.

    Think of the circular flow between producers and consumers. If wage earners have to spend more to obtain housing, or to pay a bank loan or education loans, they have less to spend on buying the goods and services they produce. They’re not paying to the producers of goods and services. They’re paying to the bankers or the real estate sector – the property sector. When you said the FIRE sector, that’s Finance, Insurance and Real Estate. For many years, national income economists and statisticians couldn’t even separate which income belonged to which, because they’re so symbiotic and interwoven.

    This is not really part of the production economy or what people call the real economy. But the FIRE sector’s rent and interest are the first things you have to pay out of your paycheck. That’s more real – in the sense of being most pressing – than goods and services. So when a family gets its paycheck, the taxes and the bank debts credit card debt they owe, and either their rent or their mortgage payment, often are automatically taken out of their check or bank account right off the top. Out of what remains, the average American wage earner only has maybe 25 to 30% of their income available to actually spend on the goods and services they produce.

    So there’s a diversion of this income to pay the FIRE sector – a sector that classical economists hoped to minimize. They wanted to get rid of the rentier class. They wanted to nationalize the land, or at least tax away its rent. They wanted the government to be the public creditor, or at least for banks to make productive loans, not finance corporate share buybacks, corporate takeovers, or lend just to inflate real estate prices and make home buyers take on higher and higher debt levels in order to obtain housing.

    How Bankers Became the Top Exploiters of the Economy



    Mom Cat, mother earth, OzoneTom and 2 othersmmonk, canoeist52 like this

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  • arendt (1432 posts)
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    1. I loved the graphic that went with this article. Here it is. n/t

    Revolutionary Banker

    • Mom Cat (14850 posts)
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      2. Perfect!

           NEVER FORGET      BERNIE WON!